Why "back to the future"? Because this is how universities were funded at the beginning of the 20th century. Then the state saw its responsibility as merely to bridge the gap between higher education's income from student fees, industrial support and community sponsorship and its expenditure. This approach was described as deficit funding.
After 1945, and especially after 1960, this approach was abandoned. Universities, in effect, become state institutions dependent for nearly all their income on the state. The University of Warwick was castigated for being too close to Midlands car manufacturers by the radical historian Edward Thompson in his book Warwick University Limited. Today, of course, such a label might be regarded as a compliment; then it was an indictment.
Now the circle has turned again. The Government used the Dearing report as a stalking horse to reintroduce student fees. Higher education is urged to increase non-state income - and has no choice but to do so. Institutions compete to raise their proportion of "private" income. Once state support of higher education was seen as a guarantee of freedom and a spur to innovation. Today it merely induces inflexibility and torpor; we have the Prime Minister's word for it.
But, just as uncritical espousal of public funding as higher education's one-and-only life-line was wrong, so today's equally thoughtless enthusiasm for (discreet and deniable) privatisation needs to be confronted. The fashionable mantra of "public is bad, private is good" may be pervasive and, sadly, persuasive; but it is nonsense. It has four fundamental flaws.
The first is that there is no realistic alternative to public funding of higher education, if the Government's ambitions to combat social exclusion, raise the quality of life and increase Britain's competitiveness in the global "knowledge" economy are to be realised. There is simply no way that the system could be maintained at its present size if students were charged full-cost fees. So those who argue for privatisation by stealth are also arguing for a much diminished system of higher education, radically curtailed opportunities and fewer graduates.
The second flaw is that the dichotomy between "public" and "private" is false. Many "private" companies are heavily dependent on public money. Take British Aerospace, for example, that prides itself on being at the far free-market end of the private-sector spectrum. But a large chunk of its income was derived from the despised public sector. It works the other way round too. Universities have always had substantial non-state income.
It is surprising that the visceral anti-public sector prejudice still seems to flourish in the Britain of the "Third Way", and even more surprising that Tony Blair himself appears not to be immune from it. The whole point of the "Third Way" surely is that old distinctions between public and private sectors make little sense in a post-welfare state society and post-industrial economy.
The third flaw is that public and private funding are not rivals but partners. The more generously the state supports universities, the more attractive they will be to private funders. And the other way round: nothing is more likely to discourage private funding than the suspicion that its main effect is to allow the state off the hook.
Nowhere is this clearer than in the United States, which is often held up as a model by the pro-privatisation people. Harvard, with its $13bn endowment, still receives generous federal funding for research and student support. Most big state universities also raise significant additional funding from their alumni, industry and the community. But they barely distinguish between private fund-raising and political lobbying.
The fourth flaw is that by over emphasizing private funding universities will spend too much time on peripheral projects and too little on their core mission - to provide public higher education and to undertake public- interest research. Already there are disturbing signs that this is happening. Six-figure gifts and grants are celebrated while the real business of institutions with eight- or nine-figure budgets - is taken for granted.
Perhaps it is time for universities to stop pretending that they are not state institutions and for higher education again to be proud of the fact that it is part of the public sector.
The writer is Vice-chancellor of Kingston University
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